Context: Recently, the centre has announced the launch of ‘Mudra Shishu loan’ to benefit small businesses and cottage industries. Under the scheme, one lakh beneficiaries can avail an interest benefit of 2 percent for a year. 
Background

• Earlier Union Finance Minister had announced the ‘Mudra Shishu loan’ while announcing the second tranche of the centre’s 20 lakh crore package to revive the Indian economy amid COVID-19 pandemic. 
• Apart from that she had announced that all small businesses impacted by coronavirus will get 2 percent interest subvention on loans up to Rs 50,000 secured under the Mudra Shishu Loan. 

About Mudra Shishu Loan

• Under Mudra Shishu Loan, those who have availed loans up to Rs 50,000 will be given an interest subvention of 2% for the next 12 months after the moratorium period extended by RBI ends. 
• The interest subvention will be provided to prompt payees for a period of 12 months.
• The scheme is expected to provide the benefit of Rs 1500 crore to about 3 crore people. 
• Three crore people will get the benefit of Rs 1500 crore. The step is aimed to prevent the suffering of shopkeepers, especially small businesses in the wake of COVID-19 pandemic.

Significance

• The move is aimed at helping small businesses, who won’t be able to make regular payments for the loans they have taken for the next few months. The businesses are already on the verge of shut down due to a lack of revenue and demand. 

About Pradhan Mantri Mudra Yojana

• It is a flagship scheme of Government of India to “fund the unfunded” by bringing such enterprises to the formal financial system and extending affordable credit to them. 
• It enables a small borrower to borrow from all Public Sector Banks such as PSU Banks, Regional Rural Banks and Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions (MFI) and Non Banking Finance Companies (NBFC) for loans upto Rs 10 lakhs for non-farm income generating activities. 
• The scheme was launched on 8th April, 2015 by the Hon'ble Prime Minister.

Types of loans provided:Under the aegis of Pradhan Mantri MUDRA Yojana, MUDRA has already created the following products / schemes.

• Shishu : covering loans upto 50,000/-
• Kishor : covering loans above 50,000/- and upto 5 lakh
• Tarun : covering loans above 5 lakh and upto 10 lakh
• The interventions have been named 'Shishu', 'Kishor' and 'Tarun' to signify the stage of growth / development and funding needs of the beneficiary micro unit / entrepreneur and also provide a reference point for the next phase of graduation / growth to look forward to. It would be ensured that at least 60% of the credit flows to Shishu Category Units and the balance to Kishor and Tarun Categories.
• There is no subsidy for the loan given under PMMY. However, if the loan proposal is linked some Government scheme, wherein the Government is providing capital subsidy, it will be eligible under PMMY also.

 Eligibility Criteria

• Any Indian Citizen who has a business plan for a non-farm sector income generating activity such as manufacturing, processing, trading or service sector and whose credit need is less than Rs 10 lakh can approach either a Bank, MFI, or NBFC for availing of Micro Units Development & Refinance Agency Ltd. (MUDRA) loans under Pradhan Mantri Mudra Yojana (PMMY).